Discovery rebuff disappoints China suitor

Two Chinese entities proposing a takeover of minerals explorer Discovery Metals say they are disappointed by Discovery's rejection.

Australian-based Discovery is focused on the exploration and development of the Kalahari copper belt in northwest Botswana in Africa.

The company produces copper at its 100 per cent-owned Boseto copper project.

On Thursday, Discovery said it had met representatives of Cathay Fortune Corporation (CFC) and the China-Africa Development Fund (CAD Fund) to discuss a non-binding proposal by CFC and CAD Fund to acquire all the Discovery shares not held by CFC for $1.70 per share.

At $1.70 per share, Discovery Metals is valued at about $830 million.

CFC is Discovery Metal's largest shareholder, with a stake already of around 13.7 per cent.

Discovery directors rejected the price proposed by CFC and CAD Fund, saying it undervalued the company.

CFC and CAD Fund said on Friday that the Discovery board had indicated that it was not prepared to engage with CFC and the CAD Fund.

"We are extremely disappointed with the response and lack of engagement from Discovery Metal's board of directors," CFC founder Yong Yu said in a statement.

Discovery said on Thursday that the indicative proposal did not reflect the value of the company's operations and expansion plans, the potential to increase the resources on the company's tenements through further exploration, the strategic value of the company with an operating project and management team in Botswana, and the scarcity value of the company.

But Discovery said it would consider any new proposal on its merits.

Discovery had advised on October 4 that it had received a proposal from CFC and CAD Fund and was evaluating it.

CFC and CAD Fund have proposed to acquire the outstanding shares of Discovery through a joint venture that would be 75 per cent-owned by CFC and 25 per cent by CAD Fund.

CFC is a Shanghai-based private equity firm.

CAD Fund is a fund set up in 2007 to support investment in Africa by Chinese enterprises.

Shares in Discovery Metals were one cent higher at $1.65 at 1500 AEDT on Friday.